Why We Can't Compromise On Public-Plan Choice

By Jacob S. Hacker, Campaign for America's Future. Posted May 29, 2009.

Of all the components of the health reform package that will be debated in Congress this year, none inspires greater admiration or ire than the idea of “public plan choice.” Public plan choice means simply that Americans younger than 65 who do not have employment-based health insurance should have the option of enrolling in a new public health insurance plan that provides good coverage on equal terms in all parts of the country.

As I have argued at length, by creating a benchmark for private plans and a new means of reining in costs and improving quality, public plan choice is the key to ensuring that health reform provides quality affordable care to all Americans over the long term.

Recently, some policy experts have called for a “compromise” approach that would involve state-based public plans designed to mimic state self-insured health plans. Some have even backed models that simply involve a government contract with one or more private insurers to administer claims. Neither approach would achieve the cost savings nor delivery system changes that a truly national public plan could. Indeed, in an online debate, Stuart Butler of The Heritage Foundation correctly stated that a self-insured nonprofit health plan such as those now run for public employees in many states would be “a public plan in name only.”

A true public plan cannot rely on private insurers to set premiums, provider rates, or terms of coverage, and it must be publicly accountable at the national level. The simplest, most workable, most cost-effective, and most attractive way to achieve these crucial goals is to model the new public plan on Medicare, the successful and popular public health insurance program for the elderly and disabled.

A Medicare-like public plan would be much more stable and secure than other approaches. It would provide the broadest possible choice of doctors. It could be offered throughout the nation on the same terms. It would have the lowest administrative costs. And its bargaining power and large risk pool would allow it to offer the most affordable possible premiums and most effectively restrain costs while upgrading the quality of care.

No less important, this model is overwhelmingly popular: In polls, between two-thirds and three-quarters of Americans say they want private plans to compete with a “government-administered public plan similar to Medicare.”

In stark contract, state-run plans or plans run by third-party administrators would have severe disadvantages:

1. They would require building a new plan (or a new set of regional plans and oversight agencies) largely from scratch, which would mean forfeiting the administrative, economic, and political advantages of building on the Medicare infrastructure.

2. Such models would also require forfeiting another major advantage of a Medicare-like public plan: the ability to provide enrollees with a broad choice of providers.

3. Most important, the prospect for cost restraint and/or quality improvement under these proposals would be limited. Medicare has increasingly out-performed private plans in restraining the rate of increase of health spending while maintaining broad access. A new public plan could draw on Medicare’s experience, as well as the experience of the national VA system, to improve its cost-control methods and enhance the quality of care.

In short, the public health insurance plan should be a model for how to deliver cost-effective high quality care. Only a national, comprehensive and truly public plan can provide this essential benchmark for private plans.

So let’s not compromise away an essential element of health reform. When the debate over reform heats up, advocates will need a clear, simple, and unthreatening vision of reform that makes a simple promise: Americans should get a real choice between private insurance and a Medicare-like public plan, not a false choice between private insurance plans and a “public plan in name only.”

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Jacob S. Hacker is a Yale University political science professor and a fellow at the New America Foundation. He is the author of The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement -- And How You Can Fight Back, as well as of the "Health Care for America" proposal recently released as part of the Economic Policy Institute's Agenda for Shared Prosperity.

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